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Leveraged Loan Volume Nears Record Amid Refinancing Frenzy

Amid a massive injection of liquidity thanks largely to CLO issuance and mutual fund inflows, new-issue leveraged loan volume climbed to a post-credit-crunch high of $185.2 billion in the first quarter, from $136.8 billion in the fourth quarter and from $115.1 billion during first three months of 2012. Indeed, the last time volume was higher was in the second quarter of 2007, when a record $187.6 billion was completed. (You can read about how the CLO market works here.)

Institutional volume, meanwhile, needs no such qualifiers. Bolstered by unprecedented refinancing activity, institutional new-issue activity totaled a record $150 billion in the first quarter, up from $90.3 billion during the prior quarter and $68.7 billion during the same period in 2012. For reference, the previous high was $144.6 billion, from the second quarter of 2007.

As participants well know, these data are sadly ironic. In fact, it was the weak pace of new-money loan volume – paired with muscular inflows – that sent borrowing costs lower, thereby setting off a barrage of opportunistic executions. Indeed, M&A-related loan volume grew only slightly, to $44.9 billion (including $36.8 billion of institutional tranches), from $38.2 billion/$29.2 billion in the fourth quarter.

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